Gov’t eyes borrowing review after bond sale

The government on Wednesday said it was reviewing its borrowing plan for the year after raising $346 million from the sale of three- and five-year retail Treasury bonds denominated in dollar and euro. "We met our objectives. There will be a primary offer period until the 27th to fill up the $500 million," National Treasurer Roberto B. Tan told reporters after the auction. He noted that with the cash raised from the bond issue, the government might cancel the auction for five-year bonds worth P8.5 billion next week. He also said the government would look at its cash position and projection to see if it had to adjust its borrowing program for the year. "We may be adjusting the borrowing program but, of course, that will have to wait or be done on a gradual basis," he said. The government plans to borrow P475 billion from the local bond market this year. Proceeds from Wednesday’s bond issue will help the plug the government’s budget deficit, which is expected to hit P293 billion this year. The government was authorized to sell up to $1 billion worth of the multi-currency bonds, but sold just half of this amount. There are no plans to raise the other $500 million in the second half, Tan said. The government sold $298 million worth of three- and five-year dollar-denominated bonds, as well as €39 million ($48 million) worth of three- and five-year euro-denominated bonds. The government sold $200 million in three-year dollar bonds, which fetched a coupon rate of 2.875 percent. It also sold $98 million in five-year dollar bonds at a rate of 4.125 percent. Meanwhile, it sold €35 million euros worth of three-year euro bonds, at a rate of 3.25 percent. It also sold €4 million in five-year euro bonds at a rate of 4.125 percent. Investors went after the three-year debt paper. Tenders for the dollar-denominated bonds reached $302 million against a $200-million offer, while those for the euro-denominated paper reached €47 million against a €35-million offer. Tenders for the dollar-denominated five-year paper summed reached $103 million against a $200-million offer, while bids for the euro bond hit €5 million against a €40-million offer. The government deliberately did not sell the five-year debt instruments based on demand to cap the rates. "The preference was really on the shorter end (three-year debt) because there was still a feeling of uncertainty. These are totally new instruments that we are offering," Tan said. He said the three-year debt paper was 10.5 basis points (bps) higher than Republic of the Philippines bonds of the same tenor. The five-year paper was 8.9 bps higher. At least a fifth of the bonds were sold to Filipino workers overseas, while the rest was offered to big investors. Filipinos overseas who buy the bonds will be exempt from withholding tax. "What we have done is to provide an investment vehicle that caters to [Filipino workers overseas] who prefer to keep their savings in foreign currency. This is an avenue for them to access investment opportunities that are safe [and] provide decent or good returns," Tan said. — Louella D. Desiderio, BusinessWorld